Japanese retailers Uniqlo and Muji plan Bay Area expansion

TOKYO -- At a time U.S. retailers are pulling back on their home turf, Asian retailers, riding the economic boom across Asia, are setting up their clothes racks in the United States.

Two Japanese retailers -- clothes maker Uniqlo and Muji, which sells home-goods and clothes, are leading the charge. They hope to mirror the success of other overseas retailers, such as H&M and Ikea.

"We'd like to focus on the Bay Area," said Nobuo Domae, chief executive of Uniqlo USA, in an interview with this newspaper at the company's Tokyo headquarters. "We'd like to dominate that area. We need to have a lot of stores in one area."

Uniqlo (pronounced YOU-nee-klo), sells jeans, T-shirts and other basics with an urban flair that are popular across Asia. The retailer, which creates its own designs, plans to open numerous stores in the greater Bay Area, Domae said.

The company, which made its first move in the Bay Area last fall by opening a store in San Francisco, did not say how soon the new stores would open or where they would be, but emphasized its intense interest. Uniqlo, which recently launched its U.S. online store, also plans to set up its Internet operations in the Bay Area.

Muji also has set its sights on the Bay Area. The company opened a store in San Francisco last year and is preparing to launch one later this year in downtown San Jose in the Fairmont Hotel building along South First Street.

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San Jose officials welcome the overseas interest because the city doesn't have enough retail to meet the needs of its 1 million residents. And the region's highly diverse population, many of whom were born overseas, makes it ideal for international retailers, said Kim Walesh, San Jose's director of economic development.

"It makes sense major global retailers would do very well in San Jose," said Walesh, who recently pitched the city to Uniqlo and also visited with Muji executives.

Uniqlo, which is part of Japan-based Fast Retailing Group, plans to open 20-30 stores a year annually in the United States through 2020. It now has five U.S. stores, mostly on the East Coast, where it just announced plans to open two more stores. The company is looking to expand first in regions like the Bay Area with large Asian populations, who are apt to be familiar with the brand, which offers clothing for men, women and children.

Muji, meanwhile, already has four stores in New York City.

"The U.S. market is huge and is still growing," Hiroyoshi Azami, president of Muji U.S.A., said in an email. He added that his company finds San Jose especially attractive because the "population is being increased with relatively young newcomers who are well-educated."

Mannequins are on display on the main floor of the Uniqlo clothing store on Powell Street in downtown San Francisco on Jan. 17, 2013. (Nhat V. Meyer/Staff)

The retail push from overseas occurs as U.S.-based retailers, such as Abercrombie & Fitch, Talbots and San Francisco-based Gap, have closed stores in the United States during the prolonged economic downturn.

Like U.S.-based retailers, Uniqlo and Muji have saturated their home market, said Webbush Securities analyst Betty Chen. "They need to find growth in China and the United States."

Uniqlo's U.S. strategy is part of Fast Retailing's ambitions to be the world's No. 1 apparel retailer. The company is opening 300 stores a year outside of Japan and has a goal to hit sales of some $60 billion by 2020. Right now, Fast Retailing, which expects $11 billion in sales this year, is ranked by revenue among the world's top apparel retailers. "We need to expand in the United States and in Europe," Domae said. "So this is necessary for us."

The back-to-the-basics but fashionable styles of Uniqlo and Muji fit the post-recession mood of American consumers, said Kailing Cai, an analyst with the research group Euromonitor.

The clothes are "affordable, stylish and practical," said Michael Mulcahy, who went shopping at Uniqlo's flagship store during a recent trip to Tokyo.

Mulcahy, board chair of Team San Jose, the nonprofit that manages a number of city facilities, including the San Jose Convention Center, is particularly fond of Uniqlo's slim-fitting down jackets "that don't make you look like the Michelin Man. It's the next best thing to a cashmere blanket. The fit is snug. They are warm but they also breathe."

Uniqlo's initial foray into the United States in 2005 -- a store in a New Jersey mall -- didn't get much traction, Domae said. So the company reworked its strategy and opened a store on Fifth Avenue in New York City in 2011, positioning itself as a destination retail site.

"It kind of has a more exciting aura -- it's international," analyst Cai said. Visiting the store "can be an adventure. It feels very much like an Apple store."

Uniqlo's stores are modeled after its 12-story flagship store in Tokyo's tony Ginza district. The displays in its glass-walled building are elegantly arranged. Clothing, from hip business attire to baby wear, is highlighted in colored lights and mirrors, creating a retail kaleidoscope effect. Employees are constantly rearranging the displays, giving each floor a new look virtually every week.

"It's about constant change," said Aldo Liguori, a former Mountain View resident who is Uniqlo's head of corporate public relations. "We are trying to say casual, high-quality, affordable and versatile. We would like our customers to create their own style."